Physical banks also used to be the go-to spot for certain transactions such as exchanging money. But now credit cards or companies such as Wise or Wealthsimple offer some of the best rates for exchanging money or withdrawing cash abroad.Melissa Tait/The Globe and Mail
Lately, watching the $4 monthly fee come out of my chequing account has been irritating me more than usual.
Maybe it’s because of how inflation has stressed my finances, or because I’ve been using that account less than ever, but every month that charge leaves me asking: why bother?
For roughly a decade, I’ve had two bank accounts: one with a no-fee online bank, and another with one of the country’s Big Six banks.
At times I contemplated closing my fee-paying account. When I was living abroad, my no-fee account didn’t allow wire transfers, so I stuck with it. But recently, I can’t think of a good reason to stay.
That’s especially because my online bank offers significantly better interest rates on my savings accounts, cheaper rates on a line of credit and a more refined app and website.
Studies also show that younger folks are getting more comfortable with online banks. A survey commissioned by NerdWallet found 47 per cent of respondents between the ages of 18 and 34 had a chequing account with an online-only bank, compared to only 32 per cent of people aged 35-44 and 27 per cent of people aged 45 to 54.
At the same time, 61 per cent of those aged 18 to 34 said they have a chequing account with a physical bank – meaning lots of people my age have both types of banks.
I’m not alone in wondering whether it’s worth keeping the physical bank though.
Enoch Omololu, founder of the personal finance website Savvy New Canadians, says he hears from people wondering the same thing, and he has pretty simple advice for them.
“If you’re young, you’re confident using an online account and you don’t have atypical transactions that only a few people do these days, then there’s no reason to hold onto your traditional bank,” said Mr. Omolulu.
He often advises people to switch to an online bank to take advantage of welcome deals that offer cash, but he notes that older folks still prefer to deal with issues in person.
Ellie Wilson, a 29-year-old Banff resident, says she used to bank with Bank of Nova Scotia and Canadian Imperial Bank of Commerce, but was unhappy with the service and switched to Tangerine roughly four years ago
“Honestly the customer service I have received from in-person banks really helped to push me online,” said Ms. Wilson, who now exclusively banks online after getting a sign-up bonus from Tangerine, which is a subsidiary of Scotiabank. (Many online-only banks are a subsidiary of a larger bank or offer rebates for fees for cash withdrawals from ATMs so you can still access cash for free.)
At no point has Ms. Wilson regretted dropping her physical banks, and says the higher interest rates and better online experience are all better with her digital bank.
Personal finance writer Jordan Kaye says she also considered going online-only.
“I think more and more Canadians are asking themselves this as we see the continued rise of digital banks in Canada,” said Ms. Kaye, who says the banking environment has changed considerably in the last five years, and digital banks now can do pretty much everything a physical one can do.
But she has decided to keep her Big Six bank for two main reasons. The first is that she received a competitive mortgage rate and a signing rebate from a physical bank that requires her to have an account with it.
The second is that her physical bank can be pretty handy when it comes to making big purchases, such as when buying a home.
That’s because you’re usually required to come up with a bank draft for the payment.
With her physical bank, she can walk in and get a money order immediately. With an online bank, you have to order one days in advance, and there’s always the chance of delays with a courier.
“It introduces an unknown variable to what can be a really stressful transaction,” said Ms. Kaye. “It always seems to be the way that home purchases go, where there’s a rush at the very end.”
Ms. Kaye also doesn’t mind having multiple bank accounts or paying the small fee.
This is where we differ. I prefer to keep things as simple as possible, and the idea of one account with no fees is becoming a big preference.
For people like me, Ms. Kaye says sticking with just an online bank has never been easier. She’s found that she can often complete tasks that require an employee’s help quicker with her online bank.
Physical banks also used to be the go-to spot for certain transactions such as exchanging money. But now credit cards or companies such as Wise or Wealthsimple offer some of the best rates for exchanging money or withdrawing cash abroad.
“There’s almost nothing interesting happening at my traditional bank,” said Mr. Omololu, while he says he can’t keep up with all the new features his Wealthsimple account keeps rolling out.
I can tell you that I’ve decided I’m finally going to close my physical account. I’ll let you know if I regret it if I close on a home purchase again.